The Uninteded Consequences of The Bioterrrorism Act
A special report by RIGGLE & CRAVEN
The Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (the Bioterrorism Act) was intended to protest the U.S. food supply from Bioterror attacks. It has questionable value in doing so. The Act also has numerous unintended consequences. Many of these consequences are serious and imposed significant changes. One major unintended consequences is an enhanced degree of control by the foreign manufacturer on pricing. Under the Act, an importer can only import product into the United States if it has the manufacturer\'s Bioterrorism identification number. Due to confidentiality of the number, this number can only be provided directly by the manufacturer or by someone whom the manufacturer has provided the number.
While, on first glance, this would appear to have no impact on pricing, it actually has a significant impact as it greatly limits, if not eliminates, the secondary, or grey market channel of distribution. Consider the following hypothetical:
Factual Situation Prior to Implementation of Bioterrorism Act
Manufacturer X is located in Country A. It primarily sells its product in the United States through importer Y. Due to the prestige of product from Country A, importer Y is able to obtain a premium price for the product. Both manufacturer A and importer Y benefit from this premium price.
Within the Home Market of Country A, the price of food is kept low by various government programs and the market. Distributor P purchases large quantities of product from manufacturer X and resells this product both in the Home Market as a distributor and also to importer M. Importer M, in turn, resells this product in the U.S. market at a price below the price from the manufacturer to importer Y. This, in turn, results in a loss of the price premium previously obtained by manufacturer and importer Y.
Under the Bioterrorism Act, Distributor P and importer M will no longer be able to ship to U.S. market unless manufacturer A agrees to provide the Bioterrorism ID number to Distributor P. However, it is not necessarily in manufacturer interest and ensures the quality, freshness and reputation of its brand to provide this number. By keeping the number confidential, manufacturer can better control who sells its product to the United States . Manufacturer X can also strictly limit which product records it is required to maintain for purposes of Bioterrorism. If it does not know which product sold to distributor P is going to ship to the U.S. then Manufacturer X must arguably maintains traceable records of ALL products sold to distributor P. If manufacturer X does not give Distributor P this number, then Manufacturer X may properly assure that that this product is not going to the U.S. Finally, as it is now selling product to the U.S. through limited channels, Manufacturer X can now receive any market premiums which might otherwise be lost because of the gray market sales.
How Can RIGGLE & CRAVEN Help?
Even at this late date, it is still possible to comply with the Bioterrorism Act and its rather draconian provisions. RIGGLE & CRAVEN, through its related entity RC Food Agents, Inc., can quickly register your entity with the FDA and help to educate your sources and your customers as to the requirements of the Act. Even if YOU are registered, your business is imperiled if your foreign processors are not also registered.
The law firm of RIGGLE & CRAVEN is providing this as part of a commitment to advise of recent developments which are of importance to the international trade community. Permission to reproduce, photocopy, reprint or excerpt this advertising material is granted provided the source is attributed to RIGGLE & CRAVEN. The information provided is in summary form and we urge readers to confirm any conclusions reached before taking action based on it.